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FDIC Federal Register Citations

High Point Bank and Trust


August 6, 2004

Robert E. Feldman
Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, DC 20429

Via e-mail: Comments@FDIC.gov

Subject: Proposed Guidance with Request for Comment
Interagency Guidance on Overdraft Protection Programs

We are pleased to respond to the Proposed Guidance on Overdraft Protection Programs. High Point Bank and Trust recently implemented an overdraft protection service for our retail customers. This service provides our customers with an alternative to third party return item fees and helps protect them as a result of an error or an emergency. After a thorough review process the Bank selected Pinnacle Financial Services and Jack Henry & Associates to provide this service for our customers. We implemented the program adhering to Pinnacle’s Best Practices and we are pleased to find that they are significantly inline with the proposed guidance.

The Bank is in concurrence with the agencies’ general approach in providing Best Practices regarding ODP programs. We respectfully offer some comments on the following:

Safety & Soundness Considerations

The Guidance establishes a clear safety and soundness standard that overdrafts must be charged-off within 30 days.

Comment: The Bank has implemented a customer-friendly approach that’s based on safety and soundness standards requiring prompt notifications to the customer of the overdraft and an encouragement to bring the account to a positive balance as soon as possible but no later than 30 days after the account went negative. After 30 days without bringing the account to a positive balance, the Overdraft Protection Program is suspended and the Bank works with the customer up to an additional 30 days for collection of the customer’s account before a charge-off occurs. The Bank supports a longer charge off policy than the 30 days proposed and recommends that 60 days would allow for the reasonable collection of a depositor account.

When an institution routinely communicates the available amount of overdraft protection to depositors, these available amounts should be reported as "unused commitments" in regulatory reports. The Agencies also expect proper risk-based capital treatment of outstanding overdrawn balances and unused commitments.

Comment: Some clarification may be helpful with the term “routinely communicates the available amount of overdraft protection”. The Bank communicates the Overdraft Protection Limit for each account type with an initial disclosure to the depositor. The Bank does not include any available overdraft protection in balances routinely provided to the depositor. The Bank recommends that this reporting requirement should be reserved only for contractually binding obligations such as traditional overdraft lines of credit or other formalized credit facilities.

Best Practices

Institutions that establish overdraft protection programs should take into consideration the following practices that have been implemented by institutions and that may otherwise be required by applicable law.

Program Features and Operation

• Alert consumers before a non-check transaction triggers any fees. When consumers attempt to use means other than checks to withdraw or transfer funds made available through an overdraft protection program, provide a specific consumer notice, where feasible, that completing the withdrawal will trigger the overdraft protection fees. This notice should be presented in a manner that permits consumers to cancel the attempted withdrawal or transfer after receiving the notice. If this is not possible, then post notices on proprietary ATMs explaining that withdrawals in excess of the actual balance will access the overdraft protection program and trigger fees for consumers who have overdraft protection services. Institutions may make access to the overdraft protection program unavailable through means other than check transactions.

Comment: The Guidance does not address POS terminals, most of which are located in retail stores throughout the country. ATM and POS systems are driven by the same systems and balance mechanisms. Clearly, customers want access to their overdraft protection limits at these locations. The absence of clear guidance concerning the inability of institutions to provide advance notice to consumers at POS may create an expectation that institutions should not make overdraft protection available at POS locations.

If you should have any questions, please let me know.


Sincerely,
Steven V. Hall
Senior Vice President
High Point Bank and Trust

 

   

   

Last Updated 08/10/2004 regs@fdic.gov

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